Entropy-based financial asset pricing: Evidence from Pakistan

• DOI: 10.1371/journal.pone.0278236
• Publication Date: 2022-12-22T18:39:38Z
• Authors: Sheng Wang; Sher Ali Khan; Mubbasher Munir; Reda Alhajj; Yousaf Ali Khan
• Keywords: Explanatory power

Entropy is an alternative measure to calculate the risk, simplify portfolios and equity risk premium. It has higher explanatory power than capital asset price model (CAPM) beta. The comparison of CAPM beta provide in depth analysis about that turn help investor make right investment decisions minimizes risk. In this context, study aims compare Shannon Rennyi Entropies with for measuring Ordinary Least square approach been utilized using a dataset 67 enterprises registered Pakistan Stock exchange. comparative entropy carried out R 2 parameters. result indicates more as beta’s power, turns be best option evaluate performances. implies should decision by choosing enterprise good returns at minimum based on technique.